GI Innovation, which has drawn attention for its aggressive research and development (R&D) investment in new drugs, received a report card far from the performance targets presented at listing as the timeline for generating results was pushed back. Given the accumulated losses and small revenue base, the market sees this year's technology export results as a watershed that will determine the company's future value and survival.
According to the pharmaceutical and biotech industry on the 12th, GI Innovation is accelerating technology exports this year, centered on its core pipelines. Because performance improvement has been delayed since listing, the assessment is that the company is at a point where it must prove business results with visible contract outcomes beyond simple R&D progress.
In particular, the market's attention is focused on the fact that, depending on whether a technology transfer contract is signed, not only short-term cash inflows but also the possibility of a mid- to long-term reassessment of corporations' value could diverge.
◇ Performance after special listing for technology 'insufficient'… buying time with cash
GI Innovation, which listed on KOSDAQ in 2023 through a special listing for technology, spends well over half of its revenue on R&D. The structure has focused funds on expanding the new drug pipeline and clinical development rather than profit generation.
At the time of listing, the company presented 2024 revenue of 148.6 billion won and operating profit of 92.6 billion won. But the actual report card was vastly different. 2024 revenue came to 24.28 million won, and the operating loss was 48.2 billion won. The revenue achievement rate versus the target was only 0.0016%, and losses continued. As of the cumulative third quarter last year, revenue was 338.1 million won and the operating loss was around 33.4 billion won.
With losses accumulating for two straight years, the deficit is also continuing to grow. The extremely limited revenue base is also cited as a burden. Although GI Innovation, a special listing corporations for technology, still has a grace period for the revenue requirement until 2027, there are concerns that if performance improvement is delayed, designation as an issue under management cannot be ruled out.
In the short term, the company has defended liquidity by raising capital. In March last year, it secured about 110 billion won in operating funds through a paid-in capital increase, and it maintained cash equivalents by adjusting the clinical costs and R&D personnel expenses planned at the time of the capital increase.
On top of that, in October last year it received 5.5 billion won in fees from Yuhan Corporation under an existing technology transfer contract, and in November it sold all 294,985 shares it held in Y-Biologics to secure an additional 8.1 billion won. According to the company, as of early this year, available cash equivalents are around 100 billion won.
◇ "No issues with core pipelines" … the key is technology transfer results
The company is aiming for a rebound through the return of management and strengthened R&D. In April last year, Chair Jang Myeong-ho, the founder, returned as CEO and is directly leading the recovery in company growth.
Some in the market say GI Innovation's corporate value is undervalued. There are expectations that if technology transfer results for the core pipelines become visible, both performance and the stock price could be reassessed.
A representative case is the allergy treatment "GI-301." The company believes this substance has the potential to surpass Novartis' global blockbuster allergy treatment "XOLAIR." XOLAIR's annual revenue is about 5 trillion won.
In July 2020, GI Innovation transferred GI-301 to Yuhan Corporation in a deal worth a total of 1.4 trillion won, and phase 2 clinical trials are underway in Korea under the name "Resigecept." Then, in Oct. 2023, it also clinched a technology export deal worth about 320 billion won with Japan's Maruho.
GI Innovation and Yuhan Corporation are also pursuing additional technology transfers of GI-301 to other global pharmaceutical companies going forward. If a contract is signed, revenue will be split 50-50 between the two companies.
The immuno-oncology pipelines "GI-101" and "GI-102" are also mentioned as candidates for technology export. The two candidates signed a joint clinical contract with Merck (MSD) in 2020, and combination trials with MSD's immuno-oncology drug Keytruda are underway.
Previously, in 2019, GI Innovation transferred these candidates to China's Simcere in a deal worth a total of 1.146 trillion won. With phase 2 clinical trials expected to begin in China this year, the possibility of additional milestone revenue is also being raised.
In the industry, there is a view that since last year GI Innovation has been in final-stage negotiations with several global pharmaceutical companies, including MSD, on technology transfers for GI-101 and GI-102.
The two candidates are verifying antitumor efficacy either as monotherapy or in combination with Keytruda. If a contract is signed, it would be the first case of a domestic biotech venture transferring immuno-oncology technology to a global big pharma. The industry expects visible results within this year. CEO Jang Myeong-ho also set a goal of obtaining U.S. Food and Drug Administration (FDA) approval for GI-102 by the first half of 2028.
GI Innovation is also continuing research on new pipelines with antibody-based new drug developer Y-Biologics. Y-Biologics listed on KOSDAQ in 2023, and GI Innovation invested 5 billion won through an equity investment before listing in 2020, realizing a valuation gain of 3.1 billion won in about five years.
Although there was speculation about a breakdown in collaboration due to the equity exit, a company official said, "Collaboration with Y-Biologics at the preclinical stage is proceeding smoothly," adding, "The equity sale was to secure cash given the characteristics of a company with heavy R&D investment."